Gap Seeks Out New Customers
Gap Inc. plans to shift its marketing “disproportionately
to acquiring new customers” this year, including a younger demographic
as well as African American, Hispanic and Asian customers.
Speaking at the recent Bank
of America Merrill Lynch consumer conference, chief executive Glenn Murphy
said that, during the recession, the company shifted its “marketing
and shifted our balance to holding on to the customers we had and didn’t put
as much money towards acquiring new customers. That was a strategic call we made.”
Now,
the company is “disproportionately” shifting its focus toward
new customers in two areas.
First is targeting the younger range of its
25 – 35 year old demographic.
Said Mr. Murphy, “Our range we halo slightly
down and slightly up is between 25 and 35 years old. At 25 to 30, our share
is lower than we’re comfortable with. You’ll see the marketing shift towards
that, whether it’s in medium or messaging, to try to get a bigger share of
that customer.”
The second area is increasing diversity in its U.S. customer
base in particular.
“We as a business do not have the share we should have with the African
American community, with the Hispanic community, and with the Asian community,” said
Mr. Murphy.
Other ways Gap Inc. will look to drive top-line growth in North
America include:
- Delivering more trend-right product and chasing hot items
more quickly through a new pipeline system that speeds concept to store from
eight to 16 weeks.
- Introducing new categories such as last year’s newly licensed
T-shirts and jewelry at Old Navy as well as the expansion
of the GapFit athletic line at its Gap chain.
- Integrating its outlet and specialty businesses at the Gap and Banana Republic,
partly to capitalize on the strength at its outlets over the last three years.
- Using RFID in select stores to not only improve inventory accuracy but
to help store associates find merchandise within a store.
- Further capitalizing on driving online sales to physical stores as well
as store to online. For example, if an item is out-of-stock online, a customer
at some Banana Republics can be sent to the nearest store to find the item.
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Discussion Questions
Discussion Questions: What challenges does Gap Inc. face in attempting to reach a younger and more diverse customer in the U.S.? What do you think of the Gap’s other strategies to drive top-line growth?
The Gap can target all the new customers they want, but until they fix the fashion in their product lines, it won’t matter. On the same note, the heating up of their competitive set should be of major concern; in particular, Uniqlo. Their simple store design, powerful graphics, great prices, and HOT styles (all formerly Gap hallmarks) really hit the mark…center bulls eye for Gap’s target customers, new and old, i.e., Uniqlo is ‘out-Gap-ing’ the Gap. So, speed to fix fashion needs to happen fast in my mind.
To summarize: if Uniqlo expands quickly in the U.S. and Gap does not/cannot respond in terms of fashion, it will be very daunting to turn the ship around, no matter the target customer.
Excellent direction for The Gap and what a challenge!
Customer acquisition strategies directed to the 20 something demographic must be edgy, anti-establishment, green, and social-network friendly. Mass media is not the way to go.
The rewards for the Gap are potentially enormous. The stores have a big enough following and footprint to avoid alienating current customers. And that’s the danger. Moving to diversity must be done with subtly. Don’t go too fast, too publicly, or aggressively for diversity.
Gap’s major problem is that it lost the pulse of the youth market somewhere in the 1970s. Subsegmenting a market you don’t understand doesn’t necessarily make it any more understandable.
GAP is in a terribly tough spot.
But all is not dire. Appealing to younger shoppers is easier than their older sisters or moms because they do not have an inbred bias, yet.
GAP does need to prove relevancy. Not an easy thing to do in specialty fashion retail and with so many sister merchants struggling for the attention of the addled. But if they luck out on the next trend, it can happen.
The tyranny of taste, or as we like to say, “retail ain’t for sissies.”
Until Gap stops its self-sabotage, improvements to inventory management and efficiency will be beside the point. Gap did a terrific job of carving out a new denim niche with its 1969 premium denim range and supporting the effort with relevant key items. Then they couldn’t resist slashing all of it to 40 percent off during last holiday, undermining the value proposition that they had worked so hard to establish in the first place. If Gap can’t support the core, they shouldn’t try for more.
Good call on the item-level RFID!…but….
This is very confusing. Gap’s brand has been all about classic, well-made American basics. Is Gap now suggesting that it wants to take on the fast-fashion leaders like H&M? They’re going to have huge changes to make if that’s the goal.
I always thought Gap’s 3 tier approach was good but poorly executed. You have Old Navy which seams to be confused between fast fashion for upscale moms and urban youth. Gap who is American classics and Banana Republic which is upscale classics and fashion forward looking. Execution is usually poorly done because it needs to be BY THE BOOK. Every time I talk to a manager and ask why are there empty arms or tables it is because the books says so and we don’t have the merchandise. GAP needs to start focusing on their customer and get away from the HEAVY focus of making the “perfect fold” on everything.
For a “mature” brand like GAP to say they are looking for new customers means their existing customers are leaving (and not coming back) and they are not generating sufficient organic business on their own. This is very concerning as marketing will get people through the door but the traffic and sales boost will be short-lived if your products and stores are not on par. Time for some soul searching GAP?
My first thought was in accord with a couple earlier responses. If Gap is changing their direction, does that mean they have lost part of the former client base? And does this mean they will change their lines to attract the markets they seek? I am a bit surprised to read one of the markets they are targeting (no pun) will be the younger Asian population. Based outside San Francisco in San Bruno would seem they have a corner on that market already because of the heavy Asian population there for generations.
This new strategy sounds confused without a good, strong focus or real understanding of the youth market. This does not sound like a recipe for success.
First Gap changed its logo and then changed its senior leadership. Now the company is attempting to acquire a new customer base that is both younger and more diverse and “disproportionately” shifting resources accordingly. Which by definition also means “disproportionately” shifting resources away from existing customers!
Changing the logo and focusing on customer acquisition is fine but under-investing in existing customers is going to be a textbook “leaky bucket” scenario. The new customers will simply be a refill for the customers that defect, and the business will fail to grow accordingly.